I got a quetion concerning levering/unlevering betas asset/equity When we lever beta asset we should use formula: Beta(asset.lev) = Beta(asset. unlev)[1+(1-t)D/E] When we lever beta equity we should use formula: Beta(eq.lev) = Beta(eq.unlev)+[Beta(eq.unlev) - Beta(debt)](1-t)*D/E Is this correct and how do these two formulas correspond with each other?

Your formulas seem to be correct but for a confusion in the usage of terms, however, it is easier to see the relation between the two when we look at the formula this way Beta(Asset = Portfolio = Unlevered) = Beta(Equity)(E/(D+E)) + Beta(Debt)(D/(D+E)) where D = Debt and E = Equity therefore, for finding the levered beta which is the Equity one, we just shift the equation, Beta(Equity = Levered) = (Beta(Unlevered) - Beta(Debt)(D/(D+E)))((D+E)/E) which becomes Beta(Equity) = Beta(Unlevered)(1+(D/E)) - Beta(Debt)(D/E) = Beta(Unlevered)+(Beta(Unlevered) -Beta(Debt))*D/E However, as the Beta of

Levering beta asset and beta equity

Quantman2318

Monkey

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